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What two components make up the required rate of return on common stock?
Wiki User
∙ 13y ago
1. Capital Gains or Losses
2. Current income.
Wiki User
∙ 13y ago
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How can one determine whether a stock is overvalued or it is undervalued?
stock is overvalued when its expected return is more than investor's required return
If a company stock price goes up and nothing else changes the required rate of return should do what?
if a companys stock prices goes up and nothing else changes, the required rate of return should
Any change in its beta is likely to affect the required rate of return on a stock which implies that a change in beta will likely have an impact on the stocks price?
False
What constitutes a constant growth stock and how it is value?
What constitutes a constant growth stock is a stock that has dividends that are expected to grow at a constant rate. The formula used to value a constant growth stock is determined by the estimated dividends that will be paid divided by the difference between the required rate of return and growth rate.
What would cause common stock shares issued to exceed common stock shares outstanding?
declaration of a stock dividend
What is the current market value of a share of RHM stock if the required return on RHM common stock is 10 percent?
$140
What financial assets is likely to have the highest required rate of return based on risk?
common stock
How can one determine whether a stock is overvalued or it is undervalued?
stock is overvalued when its expected return is more than investor's required return
Stock has a beta of 1.50 its required return is 14.oo percent and risk free rate of 5.00 What is the required rate of return on the stock market?
rs=Rrf+(rm-Rrf)b 14.0=5-0+(rm-5.0)1.50 14.o-5.0=1.50rm-7.5 9+7.5-1.50rm 16.5/1.50=required return on stock market 11=required return on market ---- ----
If a company stock price goes up and nothing else changes the required rate of return should do what?
if a companys stock prices goes up and nothing else changes, the required rate of return should
What has the higher return preferred stock or common stock?
Dividend on common stock has to be more than dividend on preferred stock because of higher risk involved in equity investments.
If the expected rate of return on a stock exceeds the required rate then?
then it is a good buy =-) To put it simply.
Why common stock called Variable income securities?
The common stock is called variable income securities because the rate of return of common stock is determined by market and hence the returns continuously changes with the market dynamics.
Risk free rate is 5 and the market risk premium is 6 What is the expected return for the overall stock market What is the required rate of return on a stock that has a beta of 1.2?
Expected return= risk free rate + Risk premium = 11 rate of return on stock= Riskfree rate + beta x( expected market return- risk free rate)
For the purpose of calculating the cost of capital the capital components are what?
The principal components taken into account to calculate the cost of capital are the following: The dollar cost of debt, the dollar cost of preferred stock, and the dollar cost of common stock.
How can you calculate internal rate of return on investment in real estat?
common stock current price $90 is expected to pay a dividend of $10. Company growth rate is 11%. estimate the expected rate of return on corp stock common stock current price $90 is expected to pay a dividend of $10. Company growth rate is 11%. estimate the expected rate of return on corp stock
How do you compute a Return on common stockholders equity?
(Net Income - Preferred Stock Dividends) / Average common stockholders' equity
